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The lease also allows you to buy the car for $8,000 immediately
$ 15.00

1. You are considering leasing a car that costs $25,000. The lease requires monthly payments of $500 for the next 5 years, starting one month from today. The lease also allows you to buy the car for $8,000 immediately after making the final lease payment. Your rich uncle, who hates leasing, offers to loan you the $25,000 at a 9% APR interest rate (i.e., 0.75% per month). Your uncle is so nice that he will allow you to repay the loan in full over the next 5 years in any way you choose. If you cannot deduct interest expense or car depreciation on your tax return, should you accept your uncle’s generous offer?

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